Vornado (VNO) Divests Stake in Lexington Realty & Urban Edge

Vornado Realty Trust VNO recently divested all the shares of Lexington Realty Trust LXP it owned. Specifically, the company sold 18,468,969 common shares, realizing net proceeds of nearly $167.7 million.

Accordingly, it will record a financial statement gain of around $16.1 million in first-quarter 2019.

Simultaneously, Vornado sold all of the 5,717,184 shares of Urban Edge Properties UE that it owned for net proceeds of around $108.5 million. This transaction, resulting in a financial statement gain of nearly $62.4 million, will be recorded in the current-quarter results.

It will be redeemed at nearly 105.51% of the principal amount plus accrued interest on Mar 31, 2019.

The prepayment charges and write-offs of unamortized financing costs relating to the notes amounts to approximately $23 million and will be recorded in the first quarter. Nonetheless, these transactions will not impact the company’s funds from operations (FFO), as adjusted figure.

Notably, the strategic move amid strong pricing environment provides the company with the dry powder to reinvest in opportunistic acquisitions. In fact, these transactions are a strategic fit for Vornado and will enhance its liquidity position and financial flexibility. In fact, as of Dec 31, 2018, it had nearly $570.9 million of cash and cash equivalents.

Further, the company has a fortress balance sheet with $3.3 million in immediate liquidity. The early redemption of notes reflects its financial strength and improves its debt maturities.

Vornado currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Key Pick

A better-ranked stock from the REIT space is Terreno Realty Corporation TRNO, carrying a Zacks Rank of 2 (Buy). The company’s FFO per share estimates for 2019 have remained unchanged at $1.32 in a month’s time. Further, it has a long-term growth rate of 8.40%.

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